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St Thomas Ol & Gas, a large energy conglomerate in processes purchased hydrocarbons to generate three nonsalable intermediate products: ICRB, INGA, and XGE. These intermediate
St Thomas Ol & Gas, a large energy conglomerate in processes purchased hydrocarbons to generate three nonsalable intermediate products: ICRB, INGA, and XGE. These intermediate products are further processed separately to produce crude oil, natural gas liquids INGL), and natural gas (measured in liquid equivalents) A federal law that has recently been passed awesorude oil at 30% of operating income. No new takis to be paid on natural gas liquid or natural gas Click the icon to view additional information.) Read the girements An overview of the process and results for August 2017 are shown here (Note: The numbers are small to keep the focus on key concepts.) - Joint Costs - - Separable Costs $2,000 Crude Oil Processing ICRS 175 barrels $210 $22 per barrel Hydrocarbons Processing INGA Processing $90 NGL 75 barrels $13 per barrel Processing XGE3 Natural Gas 550 equt barrels $1.50 per eqvt barrel Starting August 2017, St. Thomas Oil & Gas must report a separate product-line income statement for crude oil. One challenge facing St. Thomas Oil & Gas is how to allocate the joint cost of producing the three separate salable outputs. Assume no beginning or ending inventory. Print Done 0 Requirements 2. Allocate the August 2017 joint cost among the three products using the following: a. Physical-measure method b. NRV method Show the operating income for each product using the methods in requirement 1. Discuss the pros and cons of the two methods to St. Thomas Oil & Gas for making decisions about product emphasis (pricing, sell-or-process- further decisions, and so on). 3. Print Done Requirement 1. Allocate the August 2017 joint cost among the three products using the (a) Physical measure method and (b) NRV method First, allocate the August 2017 joint cost using the physical measure method. (Round the weights to five decimal places and joint costs to the nearest cent Crude Oil NGL Gas Total Physical measure of total production Weighting Joint costs allocated
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